US retail sales data came in better than expected and industrial production increased for the fourth month in a row. The solid economic data was released just hours before Federal Reserve Chairman Jerome Powell pledged to keep raising rates until inflation cools down. GDP forecasts at the start of the second quarter point to a US economic recovery. Analysts expect US economic activity to rebound in the second quarter.
Against the backdrop of good economic data, US stock indices traded higher yesterday. At the close of the stock market yesterday the Dow Jones index (US30) gained 1.34% and the S&P 500 index (US500) added 2.02%. The technology index NASDAQ (US100) jumped by 2.76%.
Major European indices closed in the green zone yesterday. German DAX (DE30) gained 1.59%, French CAC 40 (FR40) added 1.30%, Spanish IBEX 35 (ES35) jumped by 1.46%, British FTSE 100 (UK100) increased by +0.72%. The UK inflation rate reached 9.0% on an annualised basis. This is the highest recorded 12-month rate since 1997. On a monthly basis, inflation increased by 2%. The Producer Price Index, which measures the inflation rate between factories and plants, rose from 11.9% to 14% y/y. UK consumer prices are approaching a projected peak of 10.25%. The Bank of England needs to take action to suppress inflation. Analysts forecast more aggressive interest rate hikes at subsequent meetings. British Prime Minister Boris Johnson said he did not share the pessimism of Bank of England Governor Bailey, saying on Tuesday that Britain has a "fantastic future" and that ministers have the means to deal with high prices. The divergence is a sign of tension between Johnson's Conservative Party and the central bank, which senior conservative lawmakers have criticised in recent days for failing to curb inflation.
European Central Bank President Christine Lagarde has given national central bankers more say in policy meetings, asking her own board of directors to talk less and spend more time debating. Reaching consensus among different countries has always been a challenge for the Frankfurt-based central bank, and complaints about the structure of the meetings, which are usually dominated by multiple voices.
European Central Bank Governing Council spokesman Klaas Knot on Tuesday became the first eurozone official to propose a possible half-point interest rate hike if inflation risks worsen, although he currently supports a 0.25% rate hike at the July meeting.
Oil prices fell for the first time in five days as market participants expressed their displeasure with Europe's continued hesitation over a ban on Russian oil supplies. Oil was further weighed down by news that the Biden administration was to give US oil company Chevron Corp permission to negotiate to resume business with the government of Venezuelan President Nicolas Maduro, temporarily lifting the ban.
Asian markets closed in the green zone yesterday. Japan's Nikkei 225 (JP225) gained 0.42%, Hong Kong's Hang Seng (HK50) ended the day +3.27%, and Australia's S&P/ASX 200 (AU200) increased by 0.27%.
Japan's GDP fell by 0.2% for the quarter, but it was better than analysts' expectations of -1.0%. Japanese Economy Minister Yamagiwa believes the slowdown is due to rising commodity prices and supply-side constraints caused by the war in Ukraine and prolonged lockdowns in China. The industrial production rate showed a 0.3% increase last month. This is a significant drop from the 2% increase a month earlier.
Shanghai authorities have authorised 864 of the city's financial institutions to resume operations. The move is part of the financial centre's plan to reopen widely and resume a normal life.
Main market quotes:
S&P 500 (F) (US500) 4,088.85 +80.84 (+2.02%)
Dow Jones (US30) 32,654.59 +431.17 (+1.34%)
DAX (DE40) 14,185.94 +221.56 (+1.59%)
FTSE 100 (UK100) 7,518.35 +53.55 (+0.72%)
USD Index 103.30 -0.88 (-0.85%)
- – Japan GDP (q/q) at 02:50 (GMT+3);
- – Australia Wage Price Index (q/q) at 04:30 (GMT+3);
- – Japan Industrial Production (m/m) at 07:30 (GMT+3);
- – UK Consumer Price Index (m/m) at 09:00 (GMT+3);
- – UK Producer Price Index (m/m) at 09:00 (GMT+3);
- – Eurozone Consumer Price Index (m/m) at 12:00 (GMT+3);
- – Eurozone ECB Financial Stability Review at 12:00 (GMT+3);
- – US Building Permits (m/m) at 15:30 (GMT+3);
- – Canada Consumer Price Index (m/m) at 15:30 (GMT+3);
- – US Crude Oil Reserves (w/w) at 17:30 (GMT+3).
by , 2022.05.18
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